Bank of America Corporation (BAC) is currently trading around $15.80 in a 52 week range of $14.37-$18.21. The stock has been relatively weak this year with shares falling by nearly 12% year to date. BAC is set to report their most recent quarterly earnings tomorrow morning before the bell. Analysts are looking for earnings of $0.29 per share. The stock is relatively flat ahead of the report but historical data suggests that the stock could sell off on the release.

BAC has sold off on earnings day 8 of the past 12 quarters with an average move of around 4.15%. The stock has only rallied from earnings to options expiry 3 times in the past 12 quarters. BAC is also looking very weak on chart. The stock is trading well below the Ichimoku Cloud on the daily chart and both key moving averages on the cloud are also below the Ichimoku Cloud. Currently market makers are implying a move of around $0.54 in BAC stock by this
Friday’s expiration. This can be used to calculate an implied downside close of $15.26.

With both technical and historical weakness in BAC I will be looking to get short ahead of earnings. Using the downside target implied by the market maker I will put on a bearish options trade.

Potential Trade: Buying the BAC Apr 15.5 Puts for $0.14
Risk: $14 per 1 lot
Breakeven: $15.36

Aston Martin revealed its plans for a plug in electric version of its Rapide S supercar. Aston Martin CEO Andy Palmer announced that the car should be available in two years’ time and while it may not pose an immediate threat to Tesla Motors, it threaten to unseat them as the premier manufacturer of luxury electric vehicles. The electric Aston Martin will be priced well above the entry level Tesla model at around $200,000.

While this may only appeal to consumers that would be interested in TSLA higher end models the company also faces competition from automakers like General Motors (GM). GM has announced plans to release a longer range electric car in 2017, the same time that TSLA’s model 3 is scheduled to come out. Despite increasing compaction in both the high end and mass markets TSLA investors seem to have found some renewed optimism on the back of record breaking sales in Q1.

TSLA shares are currently trading around $210.00 in a 52 week range of $177.22-$291.42. The stock is down over 5% this year but has been rallying hard over the past month. Shares of TSLA have rallied over 10% in the past 30 days and has broken back above key technical resistance as determined by the Ichimoku Cloud. With TSLA trading at the high dollar amount that it does traders may be hesitant to invest all of the necessary capital it would take to carry a large TSLA position. However, a trader may choose to run a stock replacement strategy to get long TSLA momentum with much less risk that outright stock.

Trade: Buying the TSLA Sep 180 Calls for $41.00
Risk: $4100 per 1 lot
Reward: Unlimited
Breakeven: $221.00

This trade has a breakeven higher than the stock’s current price but with a delta of 75 these calls will have a profit and loss profile very similar to the underlying stock.

LinkedIn Corporation (LNKD) is an online network for professionals with over 300 million users in countries around the world. The company’s stock is currently trading around $250 in a 52 week range of $136.02-$276.18. The stock has been relatively strong this year with shares rallying more than 9% year to date. The stock is little changed today despite the announcement the firm would be undertaking its largest acquisition ever.

LNKD announced that they will be acquiring online education company Lynda.com for cash and stock in a deal valued at $1.5 billion. This acquisition should add revenue growth to LNKD as Lynda.com is a profitable company. Lynda.com offers its customer’s web based access to learning programs on a wide number of topics. The company sells these services via a subscription based model but also offers larger enterprise solutions to larger private and government organizations.

There are clear synergies between the two companies as LNKD will now be able to direct users to educational courses that will help them develop the skills needed for specific jobs. With more and more money flowing into the online education space how can a trader use options to bet on further growth for LNKD on the back of this acquisition? LNKD is a high priced stock so a trader would have to invest a large amount of capital to own the underlying stock. However, they can use a stock replacement strategy to replicate the P/L profile of the stock while only investing a fraction of the capital.

Trade: Buying the LNKD Aug 220 Calls for $41.00
Risk: $4100 per 1 lot
Reward: Unlimited
Breakeven: $261.00

This gives a trader a breakeven higher than the stock’s current price but with these calls trading with a 75 delta they will behave very much like the underlying stock.

Startup firm Oyster, a new online e-book store, is betting that consumers will flock to their subscription based model where a flat monthly fee will give them access to millions of e-books online. All 5 major publishers have given their support to the venture and are most likely hoping that Oyster becomes a viable competitor to firms like Amazon, Apple and Google. Now that Oyster has the support of the major publishers do they really threaten Amazon? Even if Oyster is able to snatch away market share from Amazon it’s not likely the move will have a measurable effect on Amazon earnings so what should an investor do with the stock.

Amazon.com, Inc. (AMZN) is closed today’s session around $381.20 and has been trading in a 52 week range of $284.00-$389.37. The stock has been doing very well this year, rallying nearly 23% year to date. Stock broke out this year after spending the majority of last year trading in a range. Investors became frustrated with low margins and investments in lower margin businesses. With AMZN break our this year how can a trader get long the stock without having to lay out all of the capital it would take to buy the stock?

Let’s look at a stock replacement strategy in AMZN.

Trade: Buying the AMZN Jul 350 calls for $41.00
Risk: $4100 per 1 lot
Reward: Unlimited
Breakeven: $391.00

This position will have a very similar P/L profile to the long stock and has a much more defined max loss.

Starbucks Corporation (SBUX) CEO Howard Shultz announced yesterday that the Seattle based coffee company will now offer most of its employees the chance to earn a bachelor’s degree on the company dime. This is an expansion of a program already in place that allowed for most workers to receive 2 years of tuition to Arizona State University online. Most SBUX employees will be eligible for the program and employees are not required to remain SBUX employees after graduating.

While investors may applaud the company for making an effort to push social progress does this mean they should buy the stock? Starbucks Corporation (SBUX) is currently trading around $94.60 in a 52 week range of $67.96-$99.20. The stock has been very strong this year and the stock is up over 15% year to date. SBUX shares are trading well above the cloud and have been very strong since rallying 6.6% on earnings day last quarter. SBUX will be reporting earnings again on Apr 23rd and this could provide a catalyst for another leg higher.

So how can a trader use options to get long ahead of SBUX’s next earnings release. With SBUX Apr 24th Weekly options implying a move of around $4.50 we can develop an upside target of $99.00, a level just inside of the 52 week highs. With this as an upside target we can then develop an options strategy.

Trade: Buying the SBUX Apr 24th Weekly 97-99 Call Spreads for $0.55
risk: $55 per 1 lot
Reward: $145 per 1 lot
Breakeven: $97.55

This trade gives a trader nearly 3-1 on their money and has a point of maximum profit right on the measured move target.

All sales of the Apple Watch have been blocked in the country of Switzerland due to apparent patent violations. A patent was filed in 1985 for the word “Apple” on a watch, this is what Apple Inc. is supposedly in violation of. Apparently the Swiss watch industry is not very excited about the idea of high end wearable tech. Aside from this issue, which will likely be resolved come launch time, optimism over the release of the Apple Watch has been somewhat hard to come by. Citi has released new research showing that the majority of runners that currently use wearable tech would not consider switching to the Apple Watch.

So if the release of the Apple Watch is representing a big point of uncertainty and risk how can a trader play it with options. As always a trader is actually able to lower their overall risk exposure using options over the underlying stock. This is true for both long and short setups so let’s examine two different trades in AAPL using options.

Apple Inc. (AAPL) is currently trading around $127.00 in a 52 week range of $73.05-$133.60. The stock has been very strong this year with shares rallying more than 15% year to date on the back of record breaking iPhone sales numbers. With stock near all-time highs investors are now looking to the watch for the next leg of growth. So how can a trader get long AAPL using options while also lowering their risk?

Let’s look at a long stock replacement strategy:

Trade: Buying the Jan 2016 110 Calls for $21.50
Risk: $2150 per 1 lot
Reward: Unlimited
Breakeven: $131.50

This trade gives a trader exposure to AAPL through January expiration and has a breakeven just above the stock’s current price, but what is a trader wanted to get short? A trader can use a similar concept to run a short stock replacement strategy. This allows a trader to get short AAPL without the unlimited risk associated with naked short stock.

Trade: Buying the AAPL Jan 2016 150 Puts for $28.00
Risk: $28 per 1 lot
Reward: $12,200
Breakeven: $122.00

This trade has a lower breakeven point that outright short stock but has a defined level of risk and gets a trader short through the end of the year.

GoDaddy Inc (GDDY) is a technology company that operates a web domain marketplace. The stock made its public debut today opening much higher than the $17-$19 expected range. The stock is currently trading north of $26 as investors seem to be flocking to the newly listed stock. After IPO day will GDDY stock still be a buy?

GoDaddy Inc will likely face stiff competition from players like Amazon and Goolge but GDDY is a very established name in the space. GoDaddy Inc has over 13 million customers in countries around the world. Currently GoDaddy Inc manages nearly 60 million domains and has been seeing red hot revenue growth over the past 3 years. Revenues have grown over 50% over that time period and ventures into new products and services is likely to drive further growth for GDDY.

GDDY has begun offering a range of new services to new and existing customers. Customers can now purchase email domains, a suite of eCommerce tools, and many other products and services geared towards small businesses. This array of new services could help drive revenue growth in the future for GDDY.

Despite a great initial offering and a range of new services that could drive growth I would not want to play GDDY until the options list. Options always offer a trader a better risk vs. reward setup so for me the play is to wait for a few weeks and then play it via options. This also allows for the Ichimoku Cloud to develop on shorter time frames. I think GDDY will be a strong stock in 2015 but will wait for the options.

The fast food giant will begin offering all day breakfast at stores in San Diego next month. McDonald’s will be testing this new concept in San Diego stores to determine if this is something they would want to launch in broader markets. The move may be an attempt to stave off competition in the breakfast space from other chains like Taco Bell, who began offering breakfast items last year.

McDonald’s stock has been stagnant over the past 12 months, rallying only 0.3% over that time, as the company faces declining revenues and net income. Lower sales in the U.S. and currency headwinds abroad have weighed on the EPS of McDonald’s over the past 12 months. On the back of this disappointing year McDonald’s CEO Don Thompson stepped down and chief brand officer Steve Easterbrook was named his replacement.

The new CEO faces some serious challenges of declining sales and changing consumer tastes. This new market taste may be an effort to change things up at McDonald’s but will it be enough? Analysts at Bank of America have a $112 price target for the stock, a 14% premium from current levels, indicating that expectations for the new CEO are high. So if a trader wanted to play McDonald’s to the long side is there a way they can do it more efficiently with options?
With shares of McDonald’s Corp. (MCD) trading around $98.30 a trader can look to put on a trade known as a stock replacement strategy. With the options market implying a move of around $8.80 by September expiration an upside target of $107.10 can be calculated and used to set up a trade.

Trade: Buying the MCD Sep 90 Calls for $9.70
Risk: $970 per 1 lot
Reward: Unlimited
Breakeven: $99.70

This trade has a breakeven only $1.40 above the stock’s current price and is deep in the money so it will have a very similar P&L profile to a long stock position. This allows a trader to enter a position for much less capital than would be required for outright long stock.

Amazon.com, Inc.(AMZN) has announced that it will be launching a new service, Amazon Home Services, that will allow customers to shop and purchase different professional services such as housekeeping, plumbing, handiwork, and other professional services. Initially there will be 700 different services offered via the new marketplace. As convenient as this new service may be for Amazon shoppers investors are still wondering if this will help spur the next leg of growth for the online giant.

AMZN stock has been somewhat stagnant since gapping higher on last earnings and the stock hasn’t made a new 52 week high since January of 2014. Investors are looking for the next phase of growth in AMZN but the company’s more recent investments in same day delivery services, brick and mortar locations, and other low margin operations have yet to show investors what they are looking for. Is this venture into a professional services marketplace the answer to the growth question?

AMZN faces competition in this space but the players that are already established are dwarfed by the size of AMZN so this could position Amazon well. If a trader thought that this new service will boost growth for Amazon how could they get long without deploying all of the capital needed to buy the stock?

AMZN is currently trading around $374 in a 52 week range of $284-$389.37. The stock gapped higher on earnings and is up just over 20% this year so a trader may want to use a stock replacement strategy to get long AMZN. Let’s see how that breaks down.

Trade: Buying the AMZN Jul 340 Calls for $44.00
Risk: $4400 per 1 lot
Reward: Unlimited
Breakeven: $384.00

This is a lot of premium but it lets a trader get long AMZN with a P&L profile very similar to the underlying stock without having to tie up as much margin.

An explosion yesterday in Manhattan is responsible for injuring 30 people and the collapse of a building in NYC’s East Village neighborhood. The explosion and resulting fires destroyed four buildings before being extinguished. As the story developed yesterday Consolidated Edison, Inc. (ED) stock sold off hard on reports that crews were working on a gas line in the building the day of the explosion.

ED stock sold off nearly 3% from open to close yesterday as news of the explosion and its possible causes continued to hit the tape. This move lower perhaps was perhaps overdone as today shares are recovering in a relatively flat market. Shares of ED are currently trading at $60.20 and are higher by 2.41% today but have yet to take back all of yesterday’s losses. So how can a trader play a possible recovery or further downside using options?

With ED options implying a move of around $3.75 by May let’s look at two different strategies:

Potential Bullish Trade: Buying the ED May 62.5-65 Call Spreads for $0.50
Risk: $50 per 1 lot
Reward: $200 per 1 lot
Breakeven: $63.00

This trade offers a trader 4-1 on their money if ED trades above $65 on May expiration.

Potential Bearish Trade: Buying the ED May 57.5-55 Put Spreads for $0.55
Risk: $55 per 1 lot
Reward: $195 per 1 lot
Breakeven: $56.95

This trade is offering a trader better than 3.5-1 on their money if ED trades below $55 on May expiration.